Good News for Misclassified Workers

Doug Parker, Worksafe

I was recently chatting with a maintenance worker who, after the building he maintained for years changed ownership, was told he was being converted from employee to “independent contractor.” This kind of summary conversion of employees to contractors in order to save costs and shift risk and liability to workers has become common over the last 20 or more years. It has fueled increased job insecurity, rising inequality, and negative health outcomes for California workers.

The California Supreme Court’s recent landmark decision in Dynamex Operations West v. Superior Court (Dynamex) has created great hope among worker activists that people like that maintenance worker — whose jobs fit traditional, common sense notions of an employment relationship — will again have the legal rights and benefits of employees.

Dynamex addresses the question of whether truck drivers that Dynamex converted into independent contractor status can sue the company as employees for California wage law violations. It adopts the “ABC” test, under which an employer-employee relationship is presumed unless the company can show each of the following: (A) it does not control or direct the way work is performed; (B) the work is outside the scope of the company’s “usual course of business” (an auto parts store hiring a plumber, for example); and © the worker customarily performs the same type of work in an independent trade or business.

The ruling is limited to the interpretation of a California wage order, but is expected to apply broadly to all California labor laws that use commonly understood definitions of employee and employer. While the case does not directly impact the narrower meaning of “employee” under federal laws governing union organizing and employee benefits, it carries with it the possibility that employers will reduce the use of independent contractor arrangements to avoid confusion and potential liability, bringing more workers into traditional employment and the ambit of federal protections.

The case has also mobilized the business community to launch a full-scale assault on the decision. A coalition led by California Chamber of Commerce has written the legislature and the Governor, urging them to take action to nullify the decision. They warn of massive economic impact, an “onslaught of litigation,” and harm to business models backed by “billions of venture capital dollars.” It should be no surprise that Uber, Lyft, and Instacart signed the letter.

For years, companies have taken advantage of a test for independent contractor status in which they held all the cards, reaping higher and higher proportions of the value workers create. The test prior to Dynamex was meant to be a functional, real-world examination of the economic realities of the work relationship, but it was co-opted by employers and management attorneys and devolved into a formalistic test they could manipulate with ease. The fact that employers have been able to convert employees (or their jobs) into independent contractors virtually at will is all you really need to know about how flawed the system has been.

My response to the Chamber? Dynamex is not about a change in the meaning of employee. It is about getting rid of blinders that have prevented the courts from seeing work relationships for what they really are. Business models that depended on courts not seeing and understanding those work relationships need to adjust and comply with the law.

I hear again and again, most frustratingly from self-professed progressives, about the inevitability of independent contracting as the new normal for workers. The drivers at Dynamex, their lawyers, and the California Supreme Court just showed us it doesn’t have to be that way, and I applaud them for it.

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